Recent Changes in Finance Act 2021

Introduction

• The Finance Act 2021 is unique by its own.
• More than 100 changes proposed in the Union Budget by Hon’ble FM.
• More than 100 other changes presented in the parliament for discussion and passed.
• Some amendments introduced in the Budget but did not finds place in the FA.
• Some changes are introduced to unsettle the settled law.

New Section introduced:

• Sec 2(29A) Meaning of liable to tax
• Sec 9B introduced relating to reconstitution and dissolution of Firm.
• Sec 144B regarding Faceless Assessment.
• Sec 194P regarding deduction of tax in case of senior citizen.
• Sec 194Q TDS on payment for purchase of goods.
• Sec 206AB TDS for non-filers of Income Tax Return.
• Sec 206CCA TCS on non-filers of Income Tax Return.
• Sec 245AA for Interim Board for settlement of cases.
• Sec 271K Failure to furnish statement

Sec 2(29A) Meaning of liable to tax

• Means,there is an income tax liability on such person under the law of that country “and” “shall” include a person who has subsequently been exempted from tax liability under the law of that country.

Sec 9B introduced relating to reconstitution and dissolution of Firm

• This section is applicable at the time of dissolution or reconstitution of firm, if the partner receives any capital assets or stock in trade,it shall be deemed that the firm has transferred such capital assets or stock in trade to the partner in the year the partner receives such capital assets or stock in trade or both.
• Any profit or gain on such deemed transfer shall be :
  • Deemed to be the income of the firm shall be chargeable to tax u/h “capital gain” for the transfer of capital assets and u/h “Business & Profession” on transfer of stock in trade.
• For consideration, the FMV on the date of receipt shall be the consideration.
• Reconstitution means:
  • If one or more partner ceases to be partner of the firm.
  • One or more partner admitted as partner in the firm.
  • All the partners are remain there but there is change in profit sharing ratio.

Sec 45(1B) Capital Gain on ULIP

• New Section inserted to Tax the gain on sale of ULIP where such ULIP is not satisfying the terms as mentioned in Sec10(10D) for claiming exemption u/s such section.

Sec 144B regarding Faceless Assessment

•  This section was inserted by Taxation and Other Laws (Relaxation and amendment of certain provisions) Act 2020 w.e.f 01.04.2021. This sections contains the complete procedure relating to faceless assessment. Like,under which sections assessments are covered in this section. How notice can be issued, how reply should be filed etc.

Sec 194P regarding deduction of tax in case of senior citizen

• Where an individual being a resident in India who is of the age of 75 years or more during the PY, having income from pension and no other income other than interest received form the same specified bank and has furnished a declaration to the bank.

Sec 194Q TDS on payment for purchase of goods

• Any person who is buyer responsible for making any payment to a resident seller on purchase of goods shall deduct TDS @ 0.1% when the aggregate value exceeds 50 lakh rupees.
• The buyer can deduct tax only when it’s turnover in the immediately preceding year exceeds 10 crore rupees.
• If the TCS has already been paid u/s 206C(1H) and 206C,this section will not apply.

Sec 206AB TDS for non-filers of Income Tax Return

• This section is applicable where the tax is required to be deducted u/c XVII-B, other than Sec 192, 192A, 194B, 194BB, 194LBC or 194N, the tax shall be deducted at the higher of the following rates:
• At twice of the rate specified in the relevant provisions of this Act.
• At twice of the rate or rates in force; or.
• At the rate of 5%.
• This section is applicable to the person “who has not filed the return of income for both of the two assessment years relevant to the two previous years in which tax is required to be deducted for which time limit for filing of Income tax return as per sec 139(1) has expired.
• The aggregate of TDS and TCS in his case is 50,000 or more in each of these two previous years.
• This does not include non-resident who does not have PE in India.

Sec 206CCA TCS on non-filers of Income Tax Return

• This section is applicable where the tax is required to be collected u/c XVII-BB, the tax shall be collected at the higher of the following rates:
• At twice of the rate specified in the relevant provisions of this Act; or.
• At the rate of 5%.
• This does not include non-resident who does not have PE in India.

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